Sterling Pressured After Fed Hold; BoE Dovish Risk Threatens Key Support
Technical Analysis:
GBP/USD traded sharply lower into Wednesday’s North American close, declining 0.48% to 1.3305 after briefly touching a session high at 1.3377. The Federal Reserve’s decision to hold rates steady was widely anticipated, yet the accompanying commentary from Chair Jerome Powell emphasized a cautious wait-and-see stance, adding modest pressure to sterling as traders shifted attention to Thursday’s Bank of England (BoE) rate decision. Market consensus expects a 25-basis-point cut from the BoE, and with short-term rate futures already pricing a slightly more dovish trajectory for the UK than the U.S., sterling faces significant short-term downside risks if the BoE’s policy message leans toward deeper cuts.
Technically, GBP/USD’s decline below the 10-day moving average (currently at 1.3335) is a bearish short-term development that positions the pair for an immediate test of critical support around 1.3260, the location of the rising 21-day moving average. A daily close beneath this 21-DMA support would represent a meaningful deterioration of recent bullish momentum, exposing a deeper retracement toward the 30-DMA at 1.3156. Below this level, the critical 50% Fibonacci retracement of the April rally (from 1.2712 to the 2025 high at 1.3445), located at 1.3079, would become the pivotal medium-term support. A breach of this Fibonacci level would decisively shift control back to bears, paving the way for an extended decline.
On the upside, bulls must quickly reclaim the 10-day moving average at 1.3335 to stabilize near-term sentiment. Above that, resistance is clearly defined at Wednesday’s high of 1.3377, followed closely by the May 6 daily high at 1.3402. Only a decisive break and close above 1.3402 would neutralize current bearish pressures and reopen a path towards the critical 2025 high at 1.3445. However, given heightened tariff uncertainties and a more dovish BoE stance anticipated by markets, upside potential for GBP/USD currently appears limited.